Tea prices likely to soften on increased supply

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Kochi: Tea prices are expected to ease a bit in coming weeks because of improvement in supply and lower export demand.

Traders said supplies would improve as production picked up in August and September, while exports are seen less owing to appreciation of Indian rupee and high auction prices. In the short run, auction prices are estimated to dip due to higher stocks and good arrival, while in the long run, the market will stabilise with production dropping as winter sets in in north India, they added.

The Indian crop has recovered substantially during the last two months. According to the estimates of the Tea Board, the shortfall in production compared to 2008 is just 4 million kgs for the period of January-August 2009. During the first five months of 2009, the shortfall in production over the previous year was almost 13 million kg.

A source at the United Planters’ Association of South India (UPASI) told FE that production during September was good. But increased availability in the Indian market and continuing deficit in Kenya and Sri Lanka have not helped Indian exports, which continue to be on the lower side.

Indian tea exports are still lower by 18 million kgs when compared to the performance of 2008. However, the value realisation is higher due to the global shortage of the commodity. Unit realisation for a kilogram of tea exported during January-August 2009 stood at Rs 134.70 as against Rs 108.87 during the year-ago period.

“Buying agents for exporters are staying away from auctions. Appreciation of the rupee has affected the sentiments,” Ajith MK of Cochin Tea Buyers Association said.

The last two auctions in Coonoor and Cochin were disappointing with prices falling by 1-2% and most of the material left unsold.

Kenya and Sri Lanka, which are mainly CTC producing countries, are reporting shortfall but that had not helped CTC exports from India, Ajith said. Russia and Iraq are seen buying Orthodox tea, but that also is likely to get lower during the year-end holidays, he added.